WASHINGTON – The International Monetary Fund (IMF) Friday said that the Grenadian economy is gradually recovering from the coronavirus (COVID-19) pandemic and that the main risk to the outlook is a prolonged pandemic, with implications for recovery in tourism and offshore education sectors.
It said that the authorities’ comprehensive response has been critical in limiting the impact of the pandemic and that fiscal policy in the near term aims to continue supporting the vulnerable, resilience building and aggregate demand.
The Washington-based financial institution said that the pandemic’s impact on the financial sector has so far been limited, partly reflecting loan moratoria.
“The enhanced frequency and intensity of monitoring of credit unions and insurers by the national nonbank regulator is welcome and should continue for the months ahead,” the IMF added after a team headed by Senior Economist, Huidan Lin, met virtually with the authorities of Grenada during the period January 6-12 to discuss recent economic developments and follow upon the policy priorities raised during the 2019 Article IV Consultation and the 2020 Request for Disbursement under the Rapid Credit Facility.
Lin said that the recovery in the economy has been led by construction and agriculture, supporting an expected expansion of real output by around five per cent in 2022.
She said following a slow recovery, tourism initially responded positively to the lifting of domestic quarantine requirements in late 2021 and that food, fuel, and transport prices are expected to continue pushing up inflation, also reflecting the impact of strained global supply chains.
The economist said that the current account deficit has widened, as weak tourism receipts, higher fuel prices and import demand from construction offset the recovery in agricultural exports.
She said public debt is estimated to have declined to 68.9 per cent of gross domestic product (GDP) in 2021 from 71.7 per cent in 2020 and expected to continue declining supported by the economic recovery.
“The main risk to the outlook is a prolonged pandemic, with implications for tourism and students’ return to Saint George’s University (SGU). The ongoing outbreak globally and locally, coupled with a slow vaccination rate with only one-third of the total population, or less than half of the eligible population, having received two doses, due to vaccine hesitancy could weigh on tourism recovery and students’ return to the SGU campus tourism and offshore education directly account for one quarter of the economy.
“This could then require additional government spending, exacerbating fiscal and external imbalances, “she said. (CMC)